Although the Holy See is sometimes metonymically referred to as the "Vatican", the Vatican City State was distinctively established with the Lateran Treaty (1929) between the Holy See and Italy to ensure the temporal, diplomatic, and spiritual independence of the Papacy. As such, ambassadors are officially accredited to the Holy See and not the Vatican City State. Conversely, Papal nuncios to states and international organisations are recognised as representing the Holy See and the integrity of the Catholic Church along with its 1.3 billion members, not the Vatican City State, as prescribed also in the Canon law of the Catholic Church (1983).[9] The "Holy See" thus refers to the See of Rome viewed as the central government of the Catholic Church. The Catholic Church, in turn, is the largest non-government provider of education and health care in the world,[10] while the diplomatic status of the Holy See facilitates the access of its vast international network of charities.

Every see is considered holy. In Greek, the adjective "holy" or "sacred" (ἱερά transliterated as hiera) is constantly applied to all such sees as a matter of course. In the West, the adjective is not commonly added, but it does form part of an official title of two sees: besides the Diocese of Rome ("the Holy See"), the Bishopric of Mainz (the former Archbishopric of Mainz, which was also of electoral and primatial rank) bears the title of "the Holy See of Mainz" (Latin: Sancta Sedes Moguntina).[12]

Notwithstanding, the Holy See was represented in and identified as a "permanent subject of general customary international law vis-à-vis all states" in the Congress of Vienna of 1814 to 1815.[13] The Papal States were recognised under the rule of the Papacy and largely restored to their former extent. Despite the Capture of Rome in 1870 by the Kingdom of Italy and the Roman Question during the Savoyard era (which made the Pope a "prisoner in the Vatican" from 1870 to 1929), its international legal subject was "constituted by the ongoing reciprocity of diplomatic relationships" that not only were maintained but multiplied.

The Secretariat of State is the only body of the Curia that is situated within Vatican City. The others are in buildings in different parts of Rome that have extraterritorial rights similar to those of embassies.

Three tribunals exercise judicial power. The Roman Rota handles normal judicial appeals, the most numerous being those that concern alleged nullity of marriage.[17] The Apostolic Signatura is the supreme appellate and administrative court concerning decisions even of the Roman Rota and administrative decisions of ecclesiastical superiors (bishops and superiors of religious institutes), such as closing a parish or removing someone from office. It also oversees the work of other ecclesiastical tribunals at all levels.[18] The Apostolic Penitentiary deals not with external judgments or decrees, but with matters of conscience, granting absolutions from censures, dispensations, commutations, validations, condonations, and other favors; it also grants indulgences.[19]

In 2001, the Holy See had a revenue of 422.098 billion Italian lire (about US$202 million at the time), and a net income of 17.720 billion Italian lire (about US$8 million).[20] According to an article by David Leigh in the Guardian newspaper, a 2012 report from the Council of Europe identified the value of a section of the Vatican's property assets as an amount in excess of €680m (£570m); as of January 2013, Paolo Mennini, a papal official in Rome, manages this portion of the Holy See's assets—consisting of British investments, other European holdings and a currency trading arm. The Guardian newspaper described Mennini and his role in the following manner: "... Paolo Mennini, who is in effect the pope's merchant banker. Mennini heads a special unit inside the Vatican called the extraordinary division of APSA – Amministrazione del Patrimonio della Sede Apostolica – which handles the "patrimony of the Holy See"."[21]

The Holy See has been recognized, both in state practice and in the writing of modern legal scholars, as a subject of public international law, with rights and duties analogous to those of States. Although the Holy See, as distinct from the Vatican City State, does not fulfill the long-established criteria in international law of statehood—having a permanent population, a defined territory, a stable government and the capacity to enter into relations with other states[22]—its possession of full legal personality in international law is shown by the fact that it maintains diplomatic relations with 180[23] states, that it is a member-state[24] in various intergovernmental international organizations, and that it is: "respected by the international community of sovereign States and treated as a subject of international law having the capacity to engage in diplomatic relations and to enter into binding agreements with one, several, or many states under international law that are largely geared to establish and preserving peace in the world."[25]

The British Foreign and Commonwealth Office speaks of Vatican City as the "capital" of the Holy See, although it compares the legal personality of the Holy See to that of the Crown in Christian monarchies and declares that the Holy See and the state of Vatican City are two international identities. It also distinguishes between the employees of the Holy See (2,750 working in the Roman Curia with another 333 working in the Holy See's diplomatic missions abroad) and the 1,909 employees of the Vatican City State.[31] The British Ambassador to the Holy See uses more precise language, saying that the Holy See "is not the same as the Vatican City State. … (It) is the universal government of the Catholic Church and operates from the Vatican City State."[32] This agrees exactly with the expression used by the website of the United States Department of State, in giving information on both the Holy See and the Vatican City State: it too says that the Holy See "operates from the Vatican City State".[33]

Although the Holy See is closely associated with the Vatican City, the independent territory over which the Holy See is sovereign, the two entities are separate and distinct. After the Italian seizure of the Papal States in 1870, the Holy See had no territorial sovereignty. In spite of some uncertainty among jurists as to whether it could continue to act as an independent personality in international matters, the Holy See continued in fact to exercise the right to send and receive diplomatic representatives, maintaining relations with states that included the major powers Russia, Prussia and Austria-Hungary. Where, in accordance with the decision of the 1815 Congress of Vienna, the Nuncio was not only a member of the Diplomatic Corps but its dean, this arrangement continued to be accepted by the other ambassadors. In the course of the 59 years during which the Holy See held no territorial sovereignty, the number of states that had diplomatic relations with it, which had been reduced to 16, actually increased to 29.[34]

The State of the Vatican City was created by the Lateran Treaty in 1929 to "ensure the absolute and visible independence of the Holy See" and "to guarantee to it an indisputable sovereignty in international affairs." Archbishop Jean-Louis Tauran, the Holy See's former Secretary for Relations with States, said that the Vatican City is a "minuscule support-state that guarantees the spiritual freedom of the Pope with the minimum territory".[35]

The Holy See, not the Vatican City, maintains diplomatic relations with states.[36] Foreign embassies are accredited to the Holy See, not to the Vatican City, and it is the Holy See that establishes treaties and concordats with other sovereign entities. When necessary, the Holy See will enter a treaty on behalf of the Vatican City.

Though, like various European powers, earlier Popes recruited Swiss mercenaries as part of an army, the Pontifical Swiss Guard was founded by Pope Julius II on 22 January 1506 as the personal bodyguards of the Pope and continues to fulfill that function.[37] It is listed in the Annuario Pontificio under "Holy See", not under "State of Vatican City".[38] At the end of 2005, the Guard had 134 members. Recruitment is arranged by a special agreement between the Holy See and Switzerland. All recruits must be Catholic, unmarried males with Swiss citizenship who have completed their basic training with the Swiss Armed Forces with certificates of good conduct, be between the ages of 19 and 30,[39] and be at least 175 cm (5 ft 9 in) in height. Members are armed with small arms and the traditional halberd (also called the Swiss voulge),[40] and trained in bodyguarding tactics.[41]

The difference between the two coats of arms is that the arms of the Holy See have the gold key in bend and the silver key in bend sinister[42][43] (as in the sede vacante coat of arms and in the external ornaments of the papal coats of arms of individual popes), while the reversed arrangement of the keys was chosen for the arms of the newly founded Vatican City State in 1929.[44]

^The Holy See's sovereignty has been recognized explicitly in many international agreements and is particularly emphasized in article 2 of the Lateran Treaty of 11 February 1929, in which "Italy recognizes the sovereignty of the Holy See in international matters as an inherent attribute in conformity with its traditions and the requirements of its mission to the world" (Lateran Treaty, English translation).

^Robert Araujo and John Lucal, Papal Diplomacy and the Quest for Peace, the Vatican and International Organizations from the early years to the League of Nations, Sapienza Press (2004), ISBN1-932589-01-5, p. 16. See also James Crawford, The Creation of States in International Law, (1979) p. 154.

^"The golden key, which points upwards on the dexter side, signifies the power that extends even to Heaven. The silver key, which must point up to the sinister side, symbolizes the power over all the faithful on earth." Bruno Bernhard Heim, Heraldry in the Catholic Church: Its Origin, Customs and Laws (Van Duren 1978 ISBN9780391008731), p. 54.